MILAN (Reuters) - Italy’s GTECH GTCH.MI will buy U.S. slot machine maker International Game Technology IGT.N for $6.4 billion including debt, shifting the lottery operator’s center of gravity away from its struggling domestic market.
The acquisition of Las Vegas-based IGT is the largest foreign acquisition by an Italian company this year and defies a trend of firms in Italy falling prey to overseas suitors as the local economy stagnates.
IGT makes popular slot machines bearing brands such as that of TV show “Wheel of Fortune” and science fiction film “Avatar”. By buying the firm, GTECH - the world’s No.1 lottery operator - will become a major global player in the casino business and strengthen its foothold in the growing U.S. gaming market.
The comparison between the Italian and U.S. sectors is stark: Total net spending for gaming in Italy fell 6.6 percent last year, while it rose 6.7 percent in the United States - above the average global growth rate of 4.2 percent.
GTECH will pay $4.7 billion in cash and shares for IGT and will also take on $1.7 billion of the U.S. firm’s net debt. The total $6.4 billion deal value is above GTECH’s own market capitalization of $4.4 billion.
The price surpasses carmaker Fiat’s FIA.MI $4.35 billion all-cash January purchase of the stake in Chrysler it did not already own.
The offer comprises $13.69 in cash per IGT share plus 0.1819 shares of a new company to be formed after the acquisition, and represents a 18 percent premium on IGT’s closing share price on Tuesday.
With the purchase of IGT, GTECH would derive more than half of its around $4.1 billion revenues from foreign operations. It currently makes 60 percent of sales in Italy, which is struggling to emerge from its longest recession in 70 years.
“With limited overlap in products and customers, the combined company will enjoy leading positions across all segments of the gaming landscape,” GTECH Chief Executive Officer Marco Sala, who will become the CEO of the new company.
STOCK MARKET SHIFT
GTECH has national lottery concessions in Italy and several state lottery concession in the United States. It also sells gaming scratchcards, as well as providing lottery services to third parties in other nations.
The company, controlled by two wealthy Italian families with interests ranging from publishing to insurance, is not new to aggressive expansion deals.
In 2006, under the name of Lottomatica, the Italian company bought U.S.-listed GTECH in a deal worth at the time around 4 billion euros.
GTECH said on Wednesday that it plans to move its stock market listing to the New York Stock Exchange from Milan, depriving the Italian stock market of one of its 40 blue chips.
IGT and GTECH will combine under a newly formed holding company, which will be based in the United Kingdom.
GTECH, which had said last month it was in talks with IGT, said the deal is expected to generate $280 million in annual cost savings by the third year after the closing of the acquisition.
Shares in GTECH were up about 3.5 percent at 0837 GMT, outperforming Italy blue-chip index which was 1.2 percent higher, as traders and analysts said future cost savings were higher than expected.
GTECH said it expects to finance the cash portion of the deal through a combination of cash it has currently available and new financing.
The company has already received binding commitments of $10.7 billion from Credit Suisse, Barclays and Citigroup to finance the deal.
Credit Suisse, Barclays and Citigroup were financial advisers to GTECH on the deal. Morgan Stanley advised IGT.
Additional reporting by Supriya Kurane and Giancarlo Navach; Editing by Lisa Jucca and Pravin Char
Our Standards: The Thomson Reuters Trust Principles.